Head to Head Analysis: DXC Technology (NYSE:DXC) versus Automatic Data Processing (NYSE:ADP)

DXC Technology (NYSE:DXC) and Automatic Data Processing (NASDAQ:ADP) are both computer and technology companies, but which is the superior stock? We will contrast the two businesses based on the strength of their institutional ownership, valuation, analyst recommendations, dividends, earnings, risk and profitability.

Insider & Institutional Ownership

87.4% of DXC Technology shares are owned by institutional investors. Comparatively, 80.2% of Automatic Data Processing shares are owned by institutional investors. 0.8% of DXC Technology shares are owned by company insiders. Comparatively, 0.3% of Automatic Data Processing shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Volatility and Risk

DXC Technology has a beta of 2.02, indicating that its share price is 102% more volatile than the S&P 500. Comparatively, Automatic Data Processing has a beta of 0.88, indicating that its share price is 12% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for DXC Technology and Automatic Data Processing, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
DXC Technology 0 9 7 0 2.44
Automatic Data Processing 0 8 3 0 2.27

DXC Technology currently has a consensus target price of $51.15, suggesting a potential upside of 41.82%. Automatic Data Processing has a consensus target price of $179.63, suggesting a potential upside of 7.41%. Given DXC Technology’s stronger consensus rating and higher probable upside, equities research analysts plainly believe DXC Technology is more favorable than Automatic Data Processing.

Dividends

DXC Technology pays an annual dividend of $0.84 per share and has a dividend yield of 2.3%. Automatic Data Processing pays an annual dividend of $3.16 per share and has a dividend yield of 1.9%. DXC Technology pays out 10.1% of its earnings in the form of a dividend. Automatic Data Processing pays out 58.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Automatic Data Processing has increased its dividend for 44 consecutive years. DXC Technology is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation & Earnings

This table compares DXC Technology and Automatic Data Processing’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
DXC Technology $20.75 billion 0.44 $1.26 billion $8.34 4.32
Automatic Data Processing $14.18 billion 5.11 $2.29 billion $5.45 30.69

Automatic Data Processing has lower revenue, but higher earnings than DXC Technology. DXC Technology is trading at a lower price-to-earnings ratio than Automatic Data Processing, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares DXC Technology and Automatic Data Processing’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
DXC Technology -6.04% 18.89% 6.77%
Automatic Data Processing 16.52% 46.94% 5.85%

Summary

DXC Technology beats Automatic Data Processing on 11 of the 17 factors compared between the two stocks.

DXC Technology Company Profile

DXC Technology Company, together with its subsidiaries, provides information technology services and solutions primarily in North America, Europe, Asia, and Australia. It operates through three segments: Global Business Services (GBS), Global Infrastructure Services (GIS), and United States Public Sector (USPS). The GBS segment offers technology solutions comprising enterprise, cloud application, and consulting services; application services; analytics services; business process services; and industry software and solutions. The GIS segment offers cloud and platform services; workplace, mobility, and Internet of Things services; and security solutions. The USPS segment delivers IT services and business solutions to all levels of government in the United States. This segment offers cloud, platform, and IT outsourcing services; enterprise and cloud application services; enterprise security solutions; mobile enterprise, virtual desktop and application, and workplace device services; and analytics services, such as analytics platforms, information governance, artificial intelligence, and advisory services. The company was formerly known as Computer Sciences Corporation and changed its name to DXC Technology Company in April 2017 as a result of its merger with the Enterprise Services business of Hewlett Packard Enterprise Company. DXC Technology Company was founded in 1959 and is headquartered in Tysons, Virginia.

Automatic Data Processing Company Profile

Automatic Data Processing, Inc. provides business process outsourcing services worldwide. It operates through two segments, Employer Services and Professional Employer Organization (PEO) Services. The Employer Services segment offers various human resources (HR) outsourcing and technology-based human capital management solutions. Its offerings include payroll, benefits administration, talent management, HR management, time and attendance management, insurance, retirement, and compliance services. This segment provides a range of solutions, which businesses of various types and sizes can use to activate talent, as well as recruit, pay, manage, and retain their workforce. It serves approximately 630,000 clients through its cloud-based strategic software as a service offering. The PEO Services segment provides HR outsourcing solutions through a co-employment model. This segment offers HR administration services, including employee recruitment, payroll and tax administration, time and attendance management, benefits administration, employee training and development, online HR management tools, and employee leave administration. It also provides employee benefits that enable eligible worksite employees with access to a 401(k) retirement savings plan, health savings accounts, flexible spending accounts, group term life and disability coverage, and an employee assistance program, as well as group health, dental, and vision coverage. In addition, this segment offers employer liability management services comprising workers' compensation program, unemployment claims management, safety compliance guidance and access to safety training, access to employment practices liability insurance, and guidance on compliance with the United States federal, state, and local employment laws and regulations. The company was founded in 1949 and is headquartered in Roseland, New Jersey.

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